Maharashtra (the state that is the largest contributor to GST exchequer across India) in addition to Madhya Pradesh has imposed lockdown-like curfew instead of complete curfew. Contrarily, other states have imposed night curfews to control the rising number of Covid cases.
Due to the closing of various organizations specially profit-seeking organizations like shops, businesses, bottlenecks in supply chains, and so on, revenue from tax collections are most likely to be reduced by half added Harpreet Singh, the Indirect tax partner at KPMG India. However, in the month of March, the GST collection of the state of Maharashtra has been Rs 17,038 crores that amounts to 18% of the “State GST collection of Maharashtra” that amounted to Rs 91,869 crore.
The immediate repercussions shall be felt by three sectors i.e. Auto, Cement, and manufacturing-oriented sectors that have already delivered inventory to dealers. The Reason being, the dealers of aforesaid industries would be stuck with no secondary sales.
“This will put further pressure on working capital, said MS Mani, partner at Deloitte India. The revenue collection in the month of May from the transactions done in April may not be as muted as in May 2020 when the revenue was washed out owing to the lockdown in April 2020. However, the repercussions/ impacts could be more severe(from both the supply side as well as demand-side), If more states impose full-day curfews experts said.”
“It’s really a tough call for the government, as the current Covid spike may warrant further lockdowns. We may well see a W shape tax collection pattern instead of a V shape pattern,” Singh added.
It is worthwhile to mention here that on one side, Maharashtra and Madhya Pradesh. Have imposed tough restrictions to curb the escalating number of Covid cases; On the other side states like Delhi, Rajasthan, Haryana, Chandigarh, Odisha, and Gujarat have imposed night curfews in some districts or all across the state or union territory. Pratik Jain, partner at Price Waterhouse & Co, LLP said that the lockdown last year had a severe effect on consumption and consumer sentiments, but since the curfews being imposed are state-specific and not national, the effects may not be as severe as were in 2020.
“With prior experience supply chain bottlenecks are expected to reduce, the impact may not be that severe. Similarly, on the compliance front, one should expect a lesser impact than last year,” he said.” Experts further noted that the curb will certainly create a bottleneck in the business and economic activity of the aforesaid states and would have a trickle-down effect on the GST, custom collections, or even GST-related compliances that need physical attendance of stakeholders.
“The physical interactions being required by various revenue departments need to be curtailed in the Covid times as this is fuelling the further spread of the virus and also leading to undue stress on the taxpayers,” said Bipin Sapra, tax partner at EY.
